News

The common stock price for Dr. Reddy's Laboratories Limited (NYSE:RDY) has appreciated 22.9% since our 1Q 10 update report, dated 07 August 2009 following reports which suggested that UK-based GlaxoSmithKline Plc may acquire the company. Given our fundamental outlook we maintain the common stock rating at a SELL. We will reassess our target price and rating in our next update report, once the company announces its 2Q 10 results. Despite our expectation of a positive currency impact on the ADR over our investment horizon, we moderate our rating from a BUY to a HOLD, based on our fundamental outlook and current price levels. We will reassess our target price and rating in our next update report, once the company announces its 2Q 10 results.

New Valuations

Yanzhou Coal Mining Company Ltd (NYSE:YZC) We expect global coal prices to be range bound in 2H 09, demonstrating a more sustained period of recovery from 1H 10 onwards. However, we believe the Chinese economic stimulus will drive modest improvement in coal demand in 2H 09 sequentially, and boost the company's sales volume in 2H 09. During 2010, we expect revenues to rebound on the back of a recovery in coal prices and improvement in the company's production capacity through organic growth as well as acquisition of overseas coal mining assets. The company has already made headway by making an acquisition offer of A$3.5 bn for Felix Resources Limited (Felix), an Australian coal mining company. Felix's Management responded favorably to the offer, recommending the deal to its shareholders. We also expect lower raw material prices and efficient cost management by the company to improve its cost structure in 2H 09 and FY 2010, leading to healthy margin expansion. Over the longer term, the company is well-placed to benefit from Chinese government stimulus packages and infrastructure development plans.

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